Pakistan Economy - News & Updates - Archive

[Owais]

SBP set to reaffirm tight monetary stance
KARACHI (updated on: July 25, 2006, 15:18 PST): The State Bank of Pakistan (SBP) is expected to reaffirm its tight monetary stance when it unveils its half-year policy statement on Saturday, analysts said.

The SBP is also likely to voice growing concerns over the country's rising external deficit, they said.

But analysts doubted whether the bank would opt for any significant depreciation of the rupee, although the carefully managed currency has been allowed to ease very gradually.

"It is very likely that the central bank will once again highlight its concerns regarding the growing external and fiscal imbalances," said Asif Qureshi, head of research at brokers Invisor Securities.

"But it is unlikely that it would allow a weakening of the rupee, as it apparently wants a stable exchange rate," he said.

The bank has raised concerns over a current account balance that has swung from a $1.8 billion surplus in 2003/04 to an estimated $5.7 billion deficit in 2005/06.

But despite the ballooning deficit, the rupee shepherded by the central bank, has held largely steady.

On Tuesday, it traded at 60.31/33 per dollar, less than one percent weaker than its exchange rate in January.

"In the short run, there is very little chance of a weakening in the rupee," said Mohammed Sohail, director of research at Jahangir Siddiqui Capital Markets.

"Maybe three months from now, the central bank may allow a two percent depreciation, but not at the moment," he said.

Invisor's Qureshi said the central bank was trying to facilitate exporters through interest rate concessions instead of a weaker rupee.

The central bank has already announced a reduction of 1.50 percentage points in its export refinance rate to 7.5 percent.

NO LOOSENING EXPECTED

Analysts said the central bank was unlikely to change its tight monetary policy stance despite a fall in headline inflation.

In 2005/06, inflation in Pakistan, as measured by the consumer price index, stood at an average of 7.92 percent, compared with 9.28 percent a year ago.

The government is targeting to reduce inflation to 6.5 percent in 2006/07.

Earlier this month, the central bank said in its quarterly economic review that a loosening of monetary policy was not advisable while inflation pressure remained and growth was strong.

A few days later, it raised the mandatory cash reserve requirement (CRR) for banks to 7.0 percent from 5.0 percent, in an attempt to check money supply and control private sector credit growth, and thereby counter inflation.

It also raised the statutory liquidity requirement (SLR) for banks to 18 percent from 15 percent.

"These moves are a clear signal that the central bank will continue its tight monetary stance despite the fact that headline inflation is coming down," said Sohail.

 

[Neo]

KARACHI (updated on: July 25, 2006, 23:02 PST): President Pervez Musharraf on Tuesday said Pakistan provides vital connectivity to all trade and energy linkages in the region.

"Pakistan is in the centre of the region and no commercial activity and energy linkages can be possible without its participation", he said while inaugurating $14 million MAPAK Edible Oil Refinery set up under a joint venture between Westbury Group of Company Pakistan and FELDA of Malaysia.

"Pakistan has a unique geo-strategic location. We are in the centre of the region which is surrounded by energy sources. It is looking for energy exports to the world and within itself. None of this is possible without Pakistan's participation", he noted.

The president noted that Pakistan is the hub of Middle East, Gulf, Central Asia, Afghanistan, China and India. Any economic and commercial activity, any energy linkages, Pakistan has to be involved, otherwise not possible, he added.

The president said that Pakistan will utilise its strength and added that communication infrastructure has to be developed to facilitate this interaction in the region and with outside world.

This included construction of ports, roads, railway and air terminals, he added.

The president asked Port Qasim Authority to come up and facilitate investment at the port. So much land is available here. This should be utilised for industrialisation, joint ventures, and investment by removing bottlenecks.

Commending the performance of Port Qasim and its chairman, he said that they should do more to further improve their performance.

Port Qasim can be the largest industrial estate in Karachi and Sindh if utilisation of land is fast for purpose of industrialisation, he added.

He said that security of investment and profitability are guaranteed in Pakistan due to rising demand and increase in purchasing power of Pakistanis.

"The future of investment is guaranteed in the policy of liberalisation, deregulation and privatisation is continued to be followed and we are determined that it will continue and investment will keep coming into Pakistan", he added.

Referring to tourism promotion, the president asked Karachiittes to visit historical places and tourist attraction in the country and promote tourism within country.

Appreciating Malaysian investment in Pakistan, he said that the bilateral relations are deeper and taken new dimension with the increased people to people contact.

"Pakistan cherishes and values its relations with Malaysia. These will remain strong for all times. They will remain ever green", he added.

Earlier, Minister for Port and Shipping Babar Khan Ghauri said that a UAE-based group will invest $3 billion in the construction of residential and commercial facilities on several island at Karachi coast.

He said that Port Qasim has attracted a foreign direct investment of $750 million in last few years. The reserves of PQA have surged from Rs 6 billion to Rs 11 billion while the number of operational units at the port rose to 91 while 71 units were underway.

He said that five new ships have been registered with Pakistani flags by the private sector and more were in the pipeline.

He criticised the opposition for merely labelling accusation and coming up with positive thinking for development.

Chairman Federal Land Development Authority (FELDA), Dr Mohammad Yousuf Noor in his welcome address said that his organisation was taking up three projects at a cost of $35 million including the completed edible oil refinery, jetty and cargo terminal.

He said the refinery has a capacity of refining 800 metric ton edible oil per day and 200 MT of soft oil per day.

Besides, his organisation will also provide training and job opportunity for locals.

 

[Owais]

Planning Commission assigned role of think tank

ISLAMABAD (July 26 2006): Prime Minister Shaukat Aziz, chairing the second meeting of the Planning Commission here on Tuesday, assigned the Planning Commission the role of a think tank and tasked it to prepare 'Vision 2030' to make Pakistan a developed industrial state, having modern infrastructure and professional skills to face the challenges of globalisation upfront and take its economic benefits on long-term basis.

The Planning Commission's meeting was held after 22 years. The first meeting was held in 1984, during the Zia regime. Deputy Chairman Dr Akram Shaikh and other members briefed the Prime Minister on the functioning of different departments of the commission.

The Prime Minister said that the Planning Commission should take the lead and perform the role of a think-tank to provide inputs to the government for policy-making. He said its immediate assignment would be to study the situation on the ground on the economic front and prepare the short-, medium- and long-term strategies ranging from 5 to 25 years for all key sectors of the economy.

He directed the Deputy Chairman to take all necessary steps to make the Planning Commission a real brain, and prepare working papers for federal and provincial ministries and co-ordinate among them to ensure that various strategies remain in line with the laid down principles.

Shaukat said that the Planning Commission should also enhance sectoral expertise and follow an objective approach to help the government sustain growth rates between 6 and 8 percent for 10 years.

He also assigned it the role of facilitators to raise investment to 20 percent, exports to 15 percent to GDP, besides increasing literacy rate, through quality education, and health services, develop infrastructure compatible to globalisation needs, poverty alleviation, industrialisation with strong linkages to SMEs and developing global skills and creating job opportunities.

The Prime Minister said planning should based on vertical and horizontal integration to avoid overlapping and duplication that can result in waste of the national resources.

He said that the Planning Commission should guide the federal ministries to make project management more efficient and, over a period of time, help them to build their own capacities to get out of the micro management of projects.

The Prime Minister also wanted the Planning Commission to play a vibrant role for achieving food, energy and water security. Other areas where he wanted a proactive role of the commission were development of modern infrastructure and enhanced productivity to benefit from globalisation and transforming Pakistan into a knowledge-based economy.

The Prime Minister said that the Planning Commission should come up with short-, medium-, and long-term plans to deal with sewerage and drainage problems.

Talking to Business Recorder after the meeting, Dr Akram Shaikh said that the Planning Commission was well-equipped to take up the new role. He hinted at taking some structural changes to take on the assigned job of a facilitator and think-tank upfront.

 

[Owais]

Consistent economic policies to ensure foreign investment: Musharraf inaugurates palm oil refinery

KARACHI (July 26 2006): President General Pervez Musharraf on Tuesday inaugurated the $14 million MAPAK Edible Oil Refinery set up under a joint venture between Westbury Group of Company, Pakistan and FELDA of Malaysia palm oil refinery in Karachi.

He held out a firm assurance that Pakistan would continue to maintain consistency in its economic policies to ensure an attractive environment for foreign investment. "The success of our economy is because of our over-arching policy of deregulation, liberalisation, and privatisation, he said at the facility.

He described the country's privatisation programme as the backbone of this policy. He said it has helped revive and reinvigorate the economy and turned the balance of payment from deficit to surplus.

The President assured that Pakistan would maintain consistency in its economic policies to woo foreign investment into the country. No investors will come unless they are not sure about the future of their investment, future of their money they are bringing in Pakistan. Referring to the talk of punitive action as reported in media, President Musharraf said that no one could dare taking such action against Pakistan.

No body dares take punitive action against Pakistan or cast an evil eye on it, the President firmly stated. He said the country's defence was strong, adding the power comes from strength and no body should be under any illusion.

He drew the participants attention to events in Lebanon while trying to underline the importance of national security. The President said security is a necessity and Pakistan would ensure it any cost. The President noted Pakistan provides vital connectivity to all trade and energy linkages in the region.

"Pakistan is in the centre of the region and no commercial activity and energy linkages can be possible without its participation," he said.

"Pakistan has a unique geo-strategic location. We are in the centre of the region, which is surrounded by energy sources. It is looking for energy exports to the world and within itself. None of this is possible without Pakistan's participation," he noted.

The President noted Pakistan is in the hub of Middle East, Gulf, Central Asia, Afghanistan, China and India. Any economic and commercial activity, any energy linkages without Pakistan's involvement is not possible," he added.

He said Pakistan will utilise its strength and added communication infrastructure has to be developed to facilitate this interaction in the region and with outside world.

This included construction of ports, roads, railway and air terminals, he added. The President asked the Port Qasim Authority to come up and facilitate investment at the port. So much land is available here. This should be utilised for industrialisation, joint ventures and investment by removing bottlenecks.

Commending performance of the Port Qasim and its chairman, he said they should do more to further improve their performance. Port Qasim can be the largest industrial estate in Karachi and Sindh if utilisation of land is fast for the purpose of industrialisation, he added.

He said security of investment and profitability are guaranteed in Pakistan due to rising demand and increase in purchasing power of Pakistanis. "The future of investment is guaranteed as liberalisation, deregulation and privatisation is continued and will be followed and we are determined that it will continue and investment will keep coming into Pakistan," he added.

Referring to tourism promotion, the President asked Karachiites to visit historical places and tourist attraction in the country and promote tourism within the country. Appreciating Malaysian investment in Pakistan, he said bilateral relations are deeper and taken new dimension with the increased people to people contact.

"Pakistan cherishes and values its relations with Malaysia. These will remain strong for all times. They will remain ever-green," he added. Earlier, ports and shipping minister Babar Khan Ghauri said a UAE-based group will invest $3 billion in the construction of residential and commercial facilities on several island at Karachi coast.

He said the Port Qasim has attracted a foreign direct investment of $750 million in last few years. The PQA reserves have surged from Rs 6 billion to Rs 11 billion while the number of operational units at the port rose to 91 while 71 units were underway. He said five new ships have been registered with Pakistani flags by the private sector and more were in the pipeline.

He criticised the opposition for merely labelling accusation and coming up with positive thinking for development.

The President recalled his recent telephonic talk with Prime Minister Badawi of Malaysia over the critical situation in Middle East and said the two countries remain in close contact over important issues.

The President called for value-addition in the industrial sector and said the establishment of a modern plant with latest technology will be a major asset for Pakistan. He said there has been an increase in imports mainly because of oil, followed by machinery, raw materials and chemicals and said these would eventually lead to increased exports and reduce the trade gap. Sindh governor Dr Ishratul Ibad and chief minister Dr Arbab Ghulam Rahim on the occasion.

 

[Owais]

SCRAs plummet to $5 million

KARACHI (July 26 2006): Massive withdrawals by USA and UK, amounting to some $9.8 million, on July 24 forced the Special Convertible Rupee Accounts (SCRAs) to dip down to a little over $5 million. The SCRAs had earlier jumped to $19.4 million on July 18 after posting successive though gradual increases.

They had suffered the first major setback of the year on July 21 with balances dipping down to less than $16 million. Individually, USA investors withdrew some $7 million on July 24 reducing the balances to $-2.6 million. UK investors followed suit. They withdrew over $3 million as on that date reducing their balances to minus $2.5 million during FY07 so far.

Switzerland also withdrew about $0.8 million with its total withdrawals reaching close to $9 million during the first 24 days of the year. Investors from Hong Kong also withdrew a small amount of $0.2 million though they still have about $4 million in their SCRAs. Altogether the four countries withdrew $10.8 million from their accounts.

Other countries neither withdrew any amount nor brought in any. Singapore, thus, continued to be the leading investor in FY07 so far reaching $15.6 million on 19th July and sustaining the level through to July 24. Hong Kong still occupied the 2nd position.

The heightening of tensions between India and Pakistan might be one of the reasons behind the development besides the SBP's aspersions and dislike about the rising level of portfolio investment and the vulnerability connected with it as expressed in its latest quarterly report on the state of the economy (cf. BR July 18) followed by 5 percent increase in the CRR and its likely application to SCRAs. KSE 100 Index, in the meanwhile, advanced to 10,351 on 24th after posting gains of about 93 points over 10,258, the level obtaining on 21st July.

 

[Owais]

Back date duty exemption: CBR to obtain law ministry ruling

ISLAMABAD (July 26 2006): The Central Board of Revenue (CBR) will obtain ruling from Ministry of Law on the powers of customs officials to issue exemption of duties/taxes with retrospective effect under section 20 of the Customs Act, 1969.

The issue came to the limelight on Tuesday when Auditor General of Pakistan challenged CBR officials' powers to grant exemption of customs duty with retrospective effect.

AG officials claimed that CBR has powers to grant exemption from duty in exceptional circumstances under section 20 of Customs Act. But this exemption could not be granted retrospectively.

Under section 20, the Board may exempt any goods from payment of whole or any part of customs duties chargeable thereon and may remit fine, penalty, charge or any other amount recoverable, the AG officials added.

Defending the Board's stance, Member Customs Shahid Rahim Shahikh told the Public Accounts Committee (PAC) that section 20 of the Customs Act empowers the Board to issue 'special exemption order'. In one case, there is a Supreme Court ruling that exemption could be granted under section 20 with retrospective effect. The benefit of exemption could be given retrospectively under section 20, but duty cannot be imposed retrospectively under the said provision.

On the other hand, general power to exempt customs duty through notification in the official Gazette is available under section 19 of the Customs Act. Taking into account the SC ruling, the benefit of exemption could be given from back date, Member Customs added.

Meanwhile, CBR Chairman Abdullah Yusuf said that the Board had issued a clarification on May 19, 2006 regarding section 20 in the light of SC's ruling. The retrospective exemption is covered under the SC ruling, and AG office viewpoint is not correct, tax officials said.

The AG office turned down CBR interpretation, saying that the legal issue should be clarified by the Law and Justice Division, as CBR is not competent authority for interpreting the legal provisions.

Giving observations over the issue, the PAC opined that the Ministry of Law and Justice is the only competent authority to clarify the legal issues. The CBR should approach the law ministry to obtain a clarification whether the SC ruling and section 20 are contradictory or similar for the settlement of the cases.

The PAC observed that there should be some check on officials empowered to give exemptions and waivers, as the department should have ample justification for giving exemption of duties/taxes.

Chairman CBR responded that the board is not empowered to give exemption to anybody without justification. There should be solid reasons as per laid down rules and regulations for obtaining exemption.

 

[Owais]

Shaukat urges CBR to enhance efficiency

ISLAMABAD (July 26 2006): Prime Minister Shaukat Aziz on Tuesday appreciated the performance of Central Board of Revenue (CBR) for collecting Rs 712 billion revenue during 2005-06 against the target of Rs 690 billion, showing an increase of 22.6 percent over the previous year.

The Prime Minister was chairing a meeting to review goals and targets of the CBR at the Prime Minister house. He hoped the department would be able to meet the revenue collection target of Rs 835 billion for the current financial year.

The Prime Minister said, besides generating revenues for the government for its budgetary needs, the CBR should aim at improving organisational efficiency, reduce cost of doing business and improve its interaction with stakeholders.

He said efforts should be made to streamline working and improve the image of the customs directorate.

The CBR should take a proactive approach in improving its performance, especially at international airports and points from where bulk of cargo is being handled, he added.

He also asked the CBR to focus on human resource development of its officials enabling them to meet future challenges.

CBR chairman Abdullah Yousuf told the Prime Minister the pendency of cases related to disputes resolution has decreased by 90 percent during the previous fiscal year. He said the number of income taxpayers has increased by 40 percent over the last two years.

The CBR chairman told the Prime Minister the CBR plans to establish 13 regional tax offices in the country, which would bring all three internal taxes, ie, income tax, sales tax and excise services under one-roof.

He said this would be a revolutionary change for better services to taxpayers. He said three Large Taxpayer Units would be functional by December this year.

The Prime Minister was told big scanners have been installed at Port Qasim, Mughalpura and NLC dry ports in Lahore and Chunian dry port in Khyber agency.

The CBR chairman told the Prime Minister existing CARE system of electronic processing of customs goods at Karachi international container terminal at KPT would be replicated at the Pakistan International Container Terminal and Qasim International Container Terminal during the past few months for improved transparency and increased efficiency.

 

[Owais]

Humayun woos Brazilian traders to invest in Pakistan

ISLAMABAD (July 26 2006): Commerce Minister Humayun Akhtar Khan on Tuesday met with the Vice President of Confederation of National Industries (CNI) of Brazil and discussed bilateral and regional trade issues, encompassing WTO and Mercosur.

According to a press release, Commerce Minister Humayun Akhtar also addressed the gathering of eminent Brazilian businessmen and briefed them on the reforms undertaken by the present government and the opportunities Pakistan offers to the world business community, besides discussing WTO issues with his Brazilian counterpart Luiz Fernando Furlan, minister for development, industry and foreign trade.

Both sides discussed trade balance in the first semester of 2006 during which exports and imports showed substantial growth particularly the leather and the textile sectors, ethanol technology, creating of a Fund being used for industrial expansion, CNG buses and Petro Brass (Brazil) investment in Pakistan.

Humayun Akhtar also called on Brazil's Acting Foreign Minister Ambassador Samuel Pinheiro Guimaraes Neto and discussed with him the Doha Development Agenda, and hoping that the present stalemate would be addressed in the foreseeable future. Such negotiations are always time-consuming and need to be dealt with patience, he said.

The two sides expressed satisfaction over the common stand as members of G-20 for a fair global trade order, and stressed the need for opening up the agricultural sector, the press release added.-PR

 

[Owais]

OGDC’s GDR issuance road shows in September ISLAMABAD: Road shows in connection with the issuance of the Global Depository Receipt (GDR) of the Oil and Gas Development Corporation (OGDC) will be held this year in September.

Advisor for economic affairs, Dr. Ashfaque Hassan told Geo News that the Advisor for finance to prime minister, Dr. Salman Shah, Federal Minister for privatization and investment, Zahid Hamid and GDR Financial Advisor were currently visiting US and Britain in this regard.

The government intends to sell 10 to 15 percent shares of OGDC to the foreign investors through floating GDR.

 

[Owais]

$1.50 billion investments made in PQA KARACHI: Port Qasim Authority (PQA) investments thus far amounted to $1.50 billion.

PQA chairman, Asad Quraishi told this to Geo News, following the inauguration of the edible oil refinery at Port Qasim. He told that such a mega-investment has thus far been done in PQA alone.

He said that the projects in Port Qasim Authority relating to the construction of different terminals, steel jetty, expo-city and diamond bar island would be drawing further $3 billion investments in next 3-4 years.

 

[Owais]

China to open Guanzhou port for Pak-products’ import BEIJING: China has expressed its willingness to open the Guanzhou seaport for facilitating the import of Pakistani goods.

China through this seaport would be importing Pakistani farm products especially fruits etc. besides these goods would also be imported through Shenzhen seaport of Guangdong province.

Earlier, food products from Pakistan were imported from Shanghai, Nanjing, Qiangdao, Tianjin, Daliyan and Beijing only.

This region of South China has extraordinary consumption of imported goods and the decision of China in this regard would open up an excellent opportunity for Pakistan to boost up its exports.

China imports 40 percent of its food products’ consumption every year, wherein, Pakistan could carve out for itself a major market share.

 

[Owais]

EPB all set to achieve US$18 bln target: Tariq Ikram LAHORE: Chairman Export Promotion Bureau (EPB) Tariq Ikram hoped that the export target of US$ 18.6 billion for the fiscal year of 2006-07 would be easily achieved.

Speaking at the Lahore Chamber of Commerce & Industry (LCCI) here on Tuesday, he said the target was set after taking into consideration all the ground realities and performance of productivity in the industrial sector during the last three years.

 

[Owais]

Pakistan rules out FMN status to India under SAFTA ISLAMABAD: Federal Secretary for Trade Syed Asif Shah said on Wednesday that Pakistan could not grant most favoured nation (MFN) status to India under the South Asian Free Trade Area (SAFTA) but the same was possible under WTO.

He stated this while talking to Geo News. India could not demand MFN status under the SAFTA, he said adding that it could demand the same under WTO after fulfillment of some requirements.

Pak-India trade was underway through the positive list exchanged between the two countries, Mr. Shah said.

 

[Owais]

FDI more than doubles to $3.5 billion in FY 2005/06
KARACHI (updated on: July 26, 2006, 17:16 PST): The Foreign direct investment (FDI) recorded more than double in the fiscal year 2005/06 to $3.52 billion, led by inflows into the communications and energy industries and the financial sector, official figures show.

Data released by the State Bank of Pakistan (SBP) on Wednesday showed FDI for the year ended June 30 rose from $1.524 billion a year ago.

The FDI figures for 2005/06 include $1.54 billion worth of privatisation inflows, compared with $363 million a year ago.

The communications sector attracted the most foreign investment during the year, $1.94 billion, followed by $329 million invested in the financial sector, $321 million in the power industry, and $313 million in oil and gas exploration.

The sharp rise in investment in communications has mainly stemmed from the sale of a 26 percent stake in Pakistan Telecommunication Co. Ltd. to Dubai-based Emirates Telecommunications (Etislat).

The telecommunications sector alone received $1.19 billion in the form of privatisation proceeds.

The United Arab Emirates led the list of foreign investors with investment of $1.42 billion during the year, followed by the United States with $517 million and Saudi Arabia with $278 million.

Inflows from foreign portfolio investment during 2005/06 were $351 million, up from $153 million in 2004/05.

 

[Neo]

Wednesday, July 26, 2006

QUETTA: Managing Director Gwadar Port Authority Air Commodore Munir Wahid Tuesday said Gwadar deep water port will be completed by December this year.

Briefing Balochistan Governor Owais Ahmed Ghani here, he said the federal government has allocated an amount of Rs 1111 million for the project in the ongoing financial year's budget.

"The work on master plan of Gwadar port at a cost of Rs 110 million is in full swing and this year the government will release Rs 61.5 million for the project", he said. He said Gwadar port's civic centre would also be constructed at a cost Rs 160 million and this year the government has allocated Rs 90 million for this project.

The construction of Express Way at a cost of Rs 3700 million is also underway for which the government has allocated a fund of Rs 100 million in the current year's budget, he maintained.

Earlier, Director General Gwadar Development Authority, Ahmed Bakhsh Lehri also briefed the governor about the ongoing projects in Gwadar and said they have received an amount of Rs 1715 million for these projects out of which Rs 1510 million have been provided by the federal government.

"The projects include various roads, a sports complex housing cricket, football and golf grounds besides indoor games facilities, an hospital with fifty bed capacity and a central park", he informed.

Gurab Housing Scheme for fishermen, jetties at Sur Bandar and Peshukan and another hospital with 350 beds are also included in these schemes. Massive recreational facilities to promote tourism would also be provided in the city, he added.

The Governor lauded the schemes and directed for speeding up the pace of work on the projects to ensure their timely completion.

"The completion of these projects will transform Gwadar into an advanced city", he observed.